An independent financial adviser (IFA) has warned of a future misselling scandal in the pension annuity sector. Bob Bullivant, the chief executive of Annuities Direct, says that he is becoming increasingly concerned about the recent launch of open market option services which are not offering a full whole of market annuity broking service.
He states that careful analysis of the existing pension arrangements needs to be considered and products other than annuities should be included in the whole of market service. Now, pointing to a trend in the market, where providers restrict the number of product providers they use and pass this off as a broking arrangement, the company says this service will typically offer just one or two enhanced annuity providers and one normal rate provider, and this could deny the client the opportunity to get the absolute best rate from across the market.
These new services are dangerous and could lead towards yet another misselling scandal, claimed Bullivant. His company also suggests that these services are forcing the client along the route of purchasing a pension annuity, at a time when more options are now available and the need to consider the whole market place has never been more relevant.
Bullivant is calling on the Financial Services Authority (FSA) to make it clear that its pension switch rules do also apply to the open market option. He said that the conversion of a pension fund is probably the largest financial transaction a client will make next to house purchase. It needs careful analysis of the existing pension arrangements and then a full whole of market offering to include products other than annuities.
One respondent to these comments said that he absolutely agrees, and that open market advice should be restricted to whole of market advisers only. How can one possibly offer a client a comprehensive full advice service if one doesn’t deal with half of the providers. To him the FSA should introduce a simple rule, whole of market only advice on annuities.
But are they right? What about an accessible dedicated service that is restricted but offers some of the best standard and enhanced annuity rates on the market, and in a truly efficient manner. Not many IFA’s are geared up to handle annuities properly anyway. Naturally, if, during the course of investigation, the client really does need specialist advice then they can be referred to an appropriate IFA. Effectively providing the best of both worlds.